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Supply conditions for new, centrally located offices will continue to tighten
Fiercer competition for new space expected, as supply has reached its lowest level since 2020 amid already tight central submarket vacancy.
Most offices are full on peak days and usage is expected to rise further, according to almost half of respondents in our 2025 European Office Occupier Sentiment Survey. Demand for office space will continue to be stronger in Central Business Districts (CBDs), as occupiers prioritise offices that offer the short commutes and attractive local amenities that will enable that increased attendance.
The historic trend of higher new supply as a proportion of total stock in CBDs versus non-CBDs reversed during 2018 (Figure 6), and has not reverted since, despite occupier demand being focused on those central submarkets. Demand will increasingly spill over into less central areas as low availability and strong rental growth in city centres pushes occupiers to consider other options.
As a result of stronger demand and tighter supply in central locations, our base case is for average European prime rental growth of 2.1% in the year ahead. In our upside scenario, explored in the Economy section, we forecast growth of 2.2%, while our downside scenario sees rental growth slow to just 0.2%.
Figure 6: CBD and non-CBD completion rates and spread between CBD and non-CBD vacancy
Note: Completion rates are four-quarter rolling completions as a percentage of existing stock. Data is an aggregate of 21 major European cities.
Trends to watch
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Flex solutions
More businesses will choose flexible office solutions, to allow them to respond to rapid market shifts. This agility is increasingly sought after by business leaders, whose companies are embedding flexibility in their portfolios by shifting a significant proportion of their footprint into flexible office space (21% on average according to our 2025 European Office Occupier Sentiment Survey, expected to rise to 29% in two years). Persistent uncertainty, coupled with options for capital-light real estate solutions, will drive further adoption of this strategy. Landlords can capture this demand by implementing an element of flex space in asset plans, either embedding their own product to offer managed/serviced suites or partnering with third-party operators to offer this amenity.
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AI-led demand
Demand for office space from AI companies is expected to rise sharply, a trend we see beginning in gateway cities. Landlords looking to capture this demand will focus on current tech talent hubs and key cities in countries with regulatory regimes favourable to the development of AI companies and products.
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Advanced analytics
AI-enabled data analytics will be used to square the circle of expected increasing office usage and already high peak utilisation. Attendance patterns, required workspace types (desk, focus room, collaboration area) and planned and predicted interactions will be used to spread utilisation throughout the building and across the week. Flexible facilities management schedules will ramp up and down in response to these predicted patterns, enabling low-cost, low-waste operations.
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Increasing utilisation
Many offices are already full on peak days, with increasing attendance expected. Where utilisation under hybrid working models exceeds practical space limits, more office space will be needed. 21% of companies in our 2025 European Office Occupier Survey were planning to increase office footprints because of this dynamic. With 47% of respondents to the same survey expecting office usage to increase, we see this trend continuing.